The UK oil company will pay damages to the thousands of hoteliers, shrimpers and oystermen along the Gulf Coast who were caught up in America's worst oil spill. The settlement follows a week of intense talks in New Orleans between lawyers for the local businesses and BP's legal team.

Following the agreement, US District Judge Carl Barbier delayed for a second time the trial into who should shoulder the blame for the explosion that killed 11 people and injured many more in April 2010. The trial had been rescheduled to start tomorrow after Judge Barbier had given BP another week to find a deal.

"The proposed settlement represents significant progress toward resolving issues from the accident and contributing further to economic and environmental restoration efforts along the Gulf Coast," said Bob Dudley, BP's chief executive.

BP said that the $7.8bn will come from the $20bn fund - known as the Gulf Coast Claims Facility (GCCF) - the company established in the summer of 2010 to compensate local individuals and businesses hit by the spill. Just $6.1bn of that pot of money has so far been spent.

The agreement, which requires the approval of Judge Barbier, covers economic damages for the tens of thousands of plaintiffs who had opted for a day in court rather than apply for compensation from the GCCF. It also covers medical damages suffered by locals in the wake of a spill that led to the release of more than 4m barrels of oil into the waters of the Gulf before the Macondo well was capped in July 2010. Of the $7.8bn, BP said that $2.3bn would go to compensate those who work in the Gulf's seafood industry.

BP shareholders are likely to be cheered by a deal that removes one of the most complicated legs of the multi-pronged legal action that has been moving through Judge Barbier's New Orelans courtroom since September 2010.

Failure to settle, "has value dilution for investors over time," said Peter Hutton, an analyst who covers the oil and gas industry for RBC Capital Markets. Mr Dudley told The Sunday Telegraph last week that a trial could last into 2014.

However, this weekend's settlement does not cover up to $18bn the US government is seeking from BP in fines under The Clean Water Act. Nor does it include the economic damages that state governments, such as those of Alabama and Louisiana, are after. The lawsuits that BP and co-defendants, Transocean and Halliburton, are facing are not resolved by the settlement either.

Sources said that the lengthy and complicated approval process of this settlement will come before any rescheduling of a date for a trial to resolve those outstanding issues. Under the settlement, the claims bought by businesses will be determined individually under a court-supervised process that has yet to be established.

Although BP said it had tried to accurately calculate the figure that would cover all the claims from local businesses, it warned that it could be higher than the $7.8bn announced.